Thinning the herd: Why physicians will benefit from the mass consolidation in the EHR industry

After a glance at the state of the electronic health record (EHR) industry, it’s clear that it’s not 2009 anymore. Companies are being acquired, going out of business, facing lawsuits from users and even the major vendors are reporting sales losses that would have been unheard of just two years ago.

The EHR market is not dying, but it is changing. And that’s a good thing—for reputable EHR vendors, physicians and the healthcare industry. In the coming months, before the Meaningful Use Stage 2 attestation begins, we will see the exit of more EHR companies who only launched to collect those government incentive dollars. Physicians, likewise, who rushed to adopt systems to collect the incentives and avoid the penalties, will replace software that is too expensive, too cumbersome, and prevents them from achieving Stage 2 and beyond.

Four years later, we’re seeing the fallout of the Meaningful Use madness and the beginning of the replacement market. This time, however, the physicians who are searching for a new EHR system have the advantage. Burned by the ludicrous hardware, software, training and hidden costs from their first installation, physicians now face a product market with lean, cloud-based systems; minimal monthly costs; hours instead of days of training; and more responsive service and support. In short, better days are ahead.

The HITECH gravy train

The Health Information Technology for Economic and Clinical Health (HITECH) Act devoted $25.9 billion to HIT programs and $20.6 billion of that funding was earmarked to expand EHR system adoption and to reward physicians and hospitals for successfully attesting to the Meaningful Use of EHRs.

Those dollar amounts created a groundswell of business activity. As many as 300 EHR companies launched after HITECH was announced bringing the estimated total in 2012 to more than 600 vendors, according to an industry consultant.1

Many of the companies that launched in that time offered unproven, hastily built software. Instead, these companies invested in expensive advertising and marketing campaigns. They hired large sales forces that made false promises about the systems’ functionality, efficiency, improved clinical environment and healthier patients. Some vendors even attempted dubious business models, offering their system for free if physicians could stomach having pharmaceutical and device advertisements on the screen next to a patient’s chart.

Similarly, physicians were highly motivated by Meaningful Use, with many succumbing to the “three P’s” when shopping for their EHR system. Those P’s were:

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